Where did you download the hg-1.4.1 package? From berkwood?

When the library.zip is unreadable, it usually means it was built by py2exe
with a --bundle 1 flag.  That causes py2exe to do some non-standard hacks to
store the python dll inside the zip file.

thg-winbuild does not use --bundle 1 for it's packages (TortoiseHg or
Mercurial), because it interferes with some python packages required by THG.